Commentary

Cigna Will Pay $67 Billion For Express Scripts As Sector Consolidates

The health insurer Cigna is buying the pharmacy benefits manager Express Scripts for $67 billion in what some observers charge will prove to be a bad deal for consumers even as analysts chalk up a
victory for shareholders in the two companies. Cigna's primary claim in its
news release, meanwhile, is that the union will result in “greater affordability and connectivity with customers and their health care providers, while making health care simpler.”

In December, PBM CVS Health and health insurer Aetna announced a $69-billion merger after several weeks of negotiations. “Together, the
transactions would represent a massive consolidation of the market for managing employees’ prescription drug benefits, prompting some experts to question whether they will be approved,”
Reuters’ Caroline Humer and Ankur Banerjee write .

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“This
type of merger would create a market-straddling giant, with new profit-maximizing incentives … ultimately leading to higher costs and potentially poorer coverage and care for consumers,”
George Slover, senior policy counsel for Consumers Union, the advocacy arm of Consumer Reports, tells them.

“The deal addresses many problems for Express Scripts. The PBM
will lose its largest client, Anthem Inc., in 2020, creating a massive hole that would have been impossible to fill. The PBM business has come under fire in recent years for its role in rising drug
prices. And Express Scripts' unique size, standalone status and high margins made it a juicy target for criticism. As part of a larger health-care entity, Express Scripts won't face as much pressure
to squeeze profit from every drug claim and will likely be more insulated from public scorn,” writesBloomberg “Gadfly” columnist Max
Nisen.

“Adding Express Scripts’ scale will likely make Cigna's insurance business more competitive — helping it lower costs for clients and offer a wider suite
of services — while diversifying its revenue,” he adds.

The shadow looming over the marketplace, as it is in so many sectors, is Amazon, of course.

“In January, Amazon, JPMorgan Chase and Berkshire Hathaway announced plans to team up to address spiraling health care costs.
Berkshire’s founder, the billionaire investor Warren Buffett, described those costs as a ‘growing tapeworm on the American economy,’” Katie Thomas, Reed Abelson and Chad
Bray remind us in The New York Times.

“In
some sense, this was inevitable, with the other major insurance companies being integrated with a PBM — Cigna doesn’t want to be at a competitive disadvantage,” Sam Richardson, a
health economist at Boston College, tells NBC News’ Martha C.
White.

“Cigna CEO David Cordani described the current healthcare market as ‘not sustainable’ in a CNBC interview on Thursday. ‘The market
demands more affordability, the market demands more personalization,’ he said,” White continues.

“By undergoing a vertical merger that brings an insurer and
benefits manager under one umbrella, Cordani said patients as well as employers would benefit from better coordination and more efficiency in providing care. ‘This combination accelerates our
movement to deliver more value,’ he said.”

But while “the two companies argue that the planned merger would benefit consumers … critics say that this deal
could easily lead to higher drug prices for consumers, as it follows a broader trend that’s seen consolidation among insurers and pharmacy-benefits managers,” points out Jacob Passy for MarketWatch.

“It doesn’t seem to me that combining these two businesses lowers their health costs and, therefore, makes their premiums cheaper,” Jeff Goldsmith, an adviser with the
health care segment at consulting firm Navigant, tells Passy. “Plus you’ve got all the challenges associated with managing a larger business to sort through as well.”

Plus “independent PBMs essentially worked to create consistency in drug pricing and to
restrict drug manufacturers from overpricing,” he writes — a model that this deal and the Aetna-CVS merger are negating. “The PBM industry was born because this is a terrible
idea,” Pramod John, CEO of specialty drug management company Vivio Health, tells Passy.

There’s usually a local story to consolidations. In this case, it’s in
Missouri, where Express Scripts employs 4,700 people in north St. Louis County and is “one of the best-performing corporations here,” writes Jacob Barker for
the St. Louis Post-Dispatch. “And it had risen over the last three decades to become the biggest company by revenue in St. Louis, coming in at No. 22 on the Fortune 500 list
last year. That’s bigger than Bank of America. Bigger than Microsoft. Bigger than its acquirer, Cigna.”

And way, way bigger than Life Time Fitness and its competitors, which operate on the preventative side of the American sickness care system.

There will be even less pharmaceuticals that the insurer will not cover. As I learned from experience, some drugs that will be covered by insurance will cost less or the same as the generic due to third party profit taking. That will be $200, $2000 either way. Of course, the patient is never told about other sources nor do they have time to shop. Doctors now have a list of pharmacies where the drug is available that comes up immediately on their laptop, but no clue about coverage or costs. Who sponsors that ? Overall, this is another path to the death and destruction of living beings for the profits of the top 1%. There was a reason monopoly laws were enacted and have fallen. It is expensive to prevent sickness. Deconstructi $50,000 gross annual income. Go ahead, people, freak yourselves out.